IT sourcing and development?

On the CII blog I recently wrote a summary of some of the current thinking on new models of IT outsourcing, and particularly ideas around socially responsible outsourcing.

This discussion stems from recent discussions that took place at the University of Manchester workshop on IT Sourcing and development.

The idea of this workshop was to revisit IT outsourcing which has become a significant industry and employer in some countries. This particularly comes in the context of growing interest in ‘impact outsourcing’, the idea that IT outsourcing can be designed to include substantial social as well as economic goals.

Here I wanted to summarise what I saw as some of the key discussions, and what it implies for our future work on outsourcing and micro-work in sub-Saharan Africa.

See full article on the CII blog

Geographies of Information Inequality in Sub-Saharan Africa

Myself and Mark Graham recently wrote a short essay for the IDRC-IT for Change Network Inclusion Roundtable that took place in Bangalore, India.

Snippet below. The full essay is available on the roundtable website

while much research has been conducted into the impacts of ICTs on older economic processes and practices, there remains surprisingly little research into the emergence of the new informationalised economy in Africa.

As such, it is precisely now that we urgently need research to understand what impacts are observable, who benefits, who doesn’t, and how these changes match up to our expectations for change.

We need to ask if we are seeing a new era of development on the continent fuelled by ICTs, or whether Sub- Saharan Africa’s engagement with the global knowledge economy continues to be on terms that reinforce dependence, inequality, underdevelopment, and economic extraversion.

Discussing Piketty

In OII we recently had a discussion of the relevance of Piketty’s ‘Captal in the Twenty First Century’ on our work. Following this I wrote a summary of our discussions on the CII website.

For our inaugural discussion around “connectivity and inequality and inclusion” we decided to jump in the deep end and tackle the 600+ pages of Piketty’s much hyped “Capital in the Twenty First Century”.

Undoubtedly this work tackles important historical accounts of the distribution of wealth and the evolution of income across a number of Western countries since the early industrial revolution. However, we wanted to also probe how these portrayals of inequality relate to questions of technology and connectivity – and their significance in this….read full post

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Why efforts to spread lCTs in developing countries often fail

I have an opinion article in SciDev this week, which is a human digestible version of my paper on innovation and scaling of ICT in low income markets (pre-pub) in developing countries

“Traditional methods of ‘scaling’ information and communications technologies are flawed, says Christopher Foster“.

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Low income markets and mobile – The problem of “quality”

When I started my research on low income use of mobile phones in Kenya, my goal was to understand how ICTs are adapted by these actors. But, research often goes in unexpected directions when you start talking to people….!

One unexpected outcome of my research was the level of complaints about mobile. People were running into problems with mobile technologies and services – cheap mobile phone handsets were unreliable, people were getting scammed through mobile money/SMS and mobile phone reception was terrible on some networks. Sure ICTs had created some new benefits and opportunities but not without creating a number of undesirable problems.

Mobile money scams highlight one issue of quality declines that has effected low income users

A new paper [1], now available in the journal Technology in Society, digs a bit deeper into these issues. The paper considers such complaints as symptomatic of a wider challenge of ‘quality’ of innovations in low income markets.

To my knowledge, this is one of the first attempt to explicitly research this negative side of mobile, so I think it is an important piece of work

Why do “quality declines” occur?

Low income users of innovations are highly demanding and pose many challenges for firms and these often link to issues around quality:

  • At the core is price sensitivity of low income users. To reduce prices, firms often ignore issues, or under-invest in products or services so as to save costs and keep prices low.
  • Firms working in low income markets are often less established and may lack experience in quality control (e.g. some generic mobile handset firms, popular amongst low income users were reported to have poor quality control in their production)
  • Low income users use innovations in unanticipated ways, and this can put unexpected stresses and strains on innovations. (e.g. users with low access to electricity may recharge their batteries in ways that reduces battery life)
  • Actors involved in diffusion of innovations often appropriate innovations for low income markets, but this causes quality problems amongst customers (e.g. in Kenya airtime is sometimes sold through over-the-air transfers by entrepreneurs, but this has introduced quality problems)

What is the effect of quality declines?

As can be seen, such quality issues first appear quite subtle and are often missed by consumers within their decision making. Initially, for users who adopt innovations, these quality issues can be seen as a small annoyance which do not outweigh the positive aspects of adoption.

However, quality problems soon become problematic. Quality reduces usefulness, and increases the ongoing running and maintenance costs (e.g. substandard mobiles lead to extra repair costs). This leads to detrimental effects – loss of trust, non-use and even rejection after adoption.

Slow quality declines can also hit a point where their negative effect becomes a market failure and governments may have to enact ’big bang’ legislation. In Kenya this occurred where gradual quality declines around generic mobile contributed to a government led “counterfeit” mobile switch off, where certain generic phones were barred from the mobile network. But, it wasn’t firms who paid the cost, it was low income users who had inadvertently purchased low quality phones who suddenly found their investment unusable.

Reducing problems

Mobile sector firms were all found to have quality standards and police them to some extent but due to pressures, particularly around pricing, firms often neglected less obvious elements of quality where they could relax their standards (e.g. mobile phone reliability, latency in mobile money).

There was also presence of policy which tried to reduce these negative quality effects in the mobile sector. However where statutes existed, they were often not implemented, or implementation was unclear and so such policy lacked teeth.

Another problem found was that both firm and policy implementation on quality did not consider the ways that innovations reach and are used by low income groups, where adaptation by entrepreneurs and users is one cause of quality problems.

A way forward….

In the mobile sector (like many other innovations focussed on low income users) there is a tendency to focus on takeup and early use and most ICT research in developing countries tends to focus on issues relating to adoption and acceptance.

But from a development angle, it is vital that an analysis beyond adoption is undertaken to see what the longer terms effects of innovations are. As can be seen from this research, when this was done in the mobile sector a whole slew of new issues emerged around quality that have barely been discussed or researched before.

As in this case, such research is also useful in that it moves away from overly optimistic analysis of new technology in low income markets to provide a more critical perspective of the issues and advice.

[1] Foster, C., 2014. Does Quality Matter for Innovations in Low Income Markets? The Case of the Kenyan Mobile Phone Sector. Technology in Society, 38, 119–129. 

Full paper (Access required. For a copy email me or lurkers can download a slightly inferior conference paper version from my publication page )

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The economic expectations and potentials of broadband Internet in East Africa

This is a cross post from Oxford Internet Institute’s ‘internet and policy’ blog – It is an interview with me and provides some insight on our work so far on internet connectivity in East Africa.


 

There has been a lot of hope and publicity about the economic potential of increased Internet connectivity in the East African region; including the hope of disintermediation and better connection to global markets. Chris Foster discusses initial findings of an OII project on Development and Broadband Internet Access in East Africa. Through surveys, interviews and in-depth observations, the project examines the expectations and stated potentials of broadband Internet in East Africa, comparing those expectations to the on-the-ground effects of broadband connectivity.

Increased connectivity is expected to be a game changer for firms in the East Africa region, enabling them to market and sell more directly to customers. The SORWATHE tea factory (Rwanda) by IFDC Photography.

Increased connectivity is expected to be a game changer for firms in the East Africa region, enabling them to market and sell more directly to customers. The SORWATHE tea factory (Rwanda) by IFDC Photography.

Ed: There has a lot of excitement about the potential of increased connectivity in the region: where did this come from? And what sort of benefits were promised?

Chris: Yes, at the end of the 2000s when the first fibre cables landed in East Africa, there was much anticipation about what this new connectivity would mean for the region. I remember I was in Tanzania at the time, and people were very excited about this development – being tired of the slow and expensive satellite connections where even simple websites could take a minute to load. The perception, both in the international press and from East African politicians was that the cables would be a game changer. Firms would be able to market and sell more directly to customers and reduce inefficient ‘intermediaries’. Connectivity would allow new types of digital-driven business, and it would provide opportunity for small and medium firms to become part of the global economy. We wanted to revisit this discussion. Were firms adopting internet, as it became cheaper? Had this new connectivity had the effects that were anticipated, or was it purely hype?

Ed: So what is the current level and quality of broadband access in Rwanda? ie how connected are people on the ground?

Chris: Internet access has greatly improved over the previous few years, and the costs of bandwidth have declined markedly. The government has installed a ‘backbone’ fibre network and in the private sector there has also been a growth in the number of firms providing Internet service. There are still some problems though. Prices are still are quite high, particularly for dedicated broadband connections, and in the industries we looked at (tea and tourism) many firms couldn’t afford it. Secondly, we heard a lot of complaints that lower bandwidth connections – WiMax and mobile internet – are unreliable and become saturated at peak times. So, Rwanda has come a long way, but we expect there will be more improvements in the future.

Ed: How much impact has the Internet had on Rwanda’s economy generally? And who is it actually helping, if so?

Chris: Economists in the World Bank have calculated that in developing economies a 10% improvement in Internet access leads to an increase in growth of 1.3%, so the effects should be taken seriously. In Rwanda, it’s too early to concretely see the effects in bottom line economic growth. In Rwanda, it’s too early to concretely see the effects in bottom line economic growth. In this work we wanted to examine the effect on already established sectors to get insight on Internet adoption and use. In general, we can say that firms are increasingly adopting Internet connectivity in some form, and that firms have been able take advantage and improve operations. However, it seems that wider transformational effects of connectivity have so far been limited.

Ed: And specifically in terms of the Rwandan tea and tourism industries: has the Internet had much effect?

Chris: The global tourism industry is driven by Internet use, and so tour firms, guides and hotels in Rwanda have been readily adopting it. We can see that the Internet has been beneficial, particularly for those firms coordinating tourism in Rwanda, who can better handle volumes of tourists. In the tea industry, adoption is a little lower but the Internet is used in similar ways – to coordinate the movement of tea from production to processing to selling, and this simplifies management for firms. So, connectivity has had benefits by improvements in efficiency, and this complements the fact that both sectors are looking to attract international investment and become better integrated into markets. In that sense, one can say that the growth in Internet connectivity is playing a significant role in strategies of private sector development.

Ed: The project partly focuses on value chains: ie where value is captured at different stages of a chain, leading (for example) from Rwandan tea bush to UK Tesco shelf. How have individual actors in the chain been affected? And has there been much in the way of (the often promised) disintermediation — ie are Rwandan tea farmers and tour operators now able to ‘plug directly’ into international markets?

Chris: Value chains allow us to pay more attention to who are the winners (and losers) of the processes described above, and particularly to see if this benefits Rwandan firms who are linked into global markets. One of the potential benefits originally discussed around new connectivity was that with the growth of online channels and platforms — and through social media — that firms as they became connected would have a more direct link to large markets and be able to disintermediate and improve the benefits they received. Generally, we can say that such disintermediation has not happened, for different reasons. In the tourism sector, many tourists are still reluctant to go directly to Rwandan tourist firms, for reasons related to trust (particularly around payment for holidays). In the tea sector, the value chains are very well established, and with just a few retailers in the end-markets, direct interaction with markets has simply not materialised. So, the hope of connectivity driving disintermediation in value chains has been limited by the market structure of both these sectors.

Ed: Is there any sense that the Internet is helping to ‘lock’ Rwanda into global markets and institutions: for example international standards organisations? And will greater transparency mean Rwanda is better able to compete in global markets, or will it just allow international actors to more efficiently exploit Rwanda’s resources — ie for the value in the chain to accrue to outsiders?

Chris: One of the core activities around the Internet that we found for both tea and tourism was firms using connectivity as a way to integrate themselves into logistic tracking, information systems, and quality and standards; whether this be automation in the tea sector or using global booking systems in the tourism sector. In one sense, this benefits Rwandan firms in that it’s crucial to improving efficiency in global markets, but it’s less clear that benefits of integration always accrue to those in Rwanda. It also moves away from the earlier ideas that connectivity would empower firms, unleashing a wave of innovation. To some of the firms we interviewed, it felt like this type of investment in the Internet was simply a way for others to better monitor, define and control every step they made, dictated by firms far away.

Ed. How do the project findings relate to (or comment on) the broader hopes of ICT4D developers? ie does ICT (magically) solve economic and market problems — and if so, who benefits?

Chris: For ICT developers looking to support development, there is often a tendency to look to build for actors who are struggling to find markets for their goods and services (such as apps linking buyers and producers, or market pricing information). But, the industries we looked at are quite different — actors (even farmers) are already linked via value chains to global markets, and so these types of application were less useful. In interviews, we found other informal uses of the Internet amongst lower-income actors in these sectors, which point the way towards new ICT applications: sectoral knowledge building, adapting systems to allow smallholders to better understand their costs, and systems to allow better links amongst cooperatives. More generally for those interested in ICT and development, this work highlights that changes in economies are not solely driven by connectivity, particularly in industries where rewards are already skewed towards larger global firms over those in developing countries. This calls for a context-dependent analysis of policy and structures, something that can be missed when more optimistic commentators discuss connectivity and the digital future.

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Scaling new technologies for low income users

In developing countries, there is growing interest in adapting new technologies to allow them to reach low income groups. Such strategies can help firms to expand to wider markets and at the same time, bring appropriate and affordable technology to the poor.

However, there is a record of firms struggling to grow beyond pilots to achieve scale. A recent publication [1] of mine (with Richard Heeks) has looked to provide a deeper analysis of how firms can go about reaching low income groups, focusing on the mobile phone sector in Kenya.

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Intermediaries

Our findings show that successful scaling to low income groups requires changed mindsets and business models. Successful firms do not successfully scale to low income groups on their own, firms tend to build or use networks of intermediary actors who more closely link to, and understand lower income communities.

However, often the role of intermediaries is less considered – in mobile this includes actors like handset retailers, mobile money agents etc – they are deeply involved with ICTs and they adapt and domesticate ICT technologies and services to the needs of their local communities.

Our work suggests that how large firms interact, guide or respond to these networks of ‘associates’, is central to successful innovation amongst low income groups.

Stages

Evidence from Kenya suggests that the common idea of products being innovated during a pilot stage, and then firms diffusing innovations are not representative of reality. Instead processes of innovation and scaling are intertwined.

Four distinct stages of “innovation scaling” were found, all which have a very distinct roles, both for lead firms and intermediaries.

Pilot – Firms who are looking to reach low income groups run pilots to see and adapt innovations. Intermediaries can be an important element of such pilot studies, who lead early adaptations suggesting new directions for innovations.

In Kenya, M-Pesa originally started as a micro-finance trial. One influence during the trial was analysis of activities of users and M-Pesa agents. This contributed to  revealing the importance of transfers, which became the core of M-Pesa.

Rollout – New issues occur when firms move pilots into the market, and frequently a range of unanticipated teething problems can emerge. Without careful attention these small problems can become more serious problems and limit scaling. In this case, intermediaries serve as the ‘eyes and ears’ for lead firms, providing knowledge to enable lead firms to correct.

Aggressive scaling – In the mobile sector, we found that innovation more rapidly scaled to low income users when intermediaries had freedom to more dynamically innovate.

For instance, with M-Pesa, this came when agents started to independently innovate in business models. In mobile handsets, growing adaptations for low income users amongst small retails had the same effect. So, growth comes as innovation leadership somewhat ‘drifts’ away from lead firms to their intermediary networks.

Standardisation – With more and more local adaptations and intermediaries, it is possible that innovations become messy or unmanageable, and lead firms look to reign back better control of innovations. In our research this stage was problematic, where standardisation often inadvertently broke key relationships around innovations.

Firm Implications

This research has implications on how firms strategise and act as they scale. Firms looking to reach low income users need to recognise that how they enable or guide their networks of intermediaries is vital to the scaling of ICTs.

More specific recommendations vary as innovation scale:

During pilot work – Firms that are open minded about innovation and embrace ‘co-production’ processes, where intermediaries and users are involved in adapting innovation, will be advantageous to appropriate forms of innovation for low income users.

During roll-out – As intermediaries serve as the ‘eyes and ears’, good linkages and feedback between intermediaries and lead firms provide invaluable insight about issues in early innovations. This allows opportunities for firms to swiftly rectify problems that were perhaps not visible during the pilot process.

In aggressive scaling – Control of innovation drifts from the lead firm to networks and lead firms should be encouraged to support and amplify suitable adaptations through ‘scaffold’. This occurs when firm make their own adaptations to innovations which support and amplify those ‘local’ innovations of intermediaries.

Standardisation has been problematised. Lead firms need to take care when making changes around innovations or intermediaries without deeper analysis of the implications. Standardisations can destroy fragile relationships that are important in scaling to low income groups.

Summary

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This research suggests two new insights 1) a more refine way of understanding how firms scale and 2) arguing for the importance of intermediaries. It suggests that traditional business approaches are liable to fail. More adaptive firms, particularly those who nurture intermediaries are liable to benefit during scaling.

[1] Foster, C.G. & Heeks, R.B. (2013) Innovation and Scaling of ICT for the Bottom-of-the-Pyramid. Journal of Information Technology. Full article (access required) or check my publications page for pre-pub version

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Testing

Yes, it works

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